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  • The NASDAQ printed another record and gained 0.3% to end around 9,954.
  • The S&P 500 lost 0.8% to end around 3,207.
  •  Dow Jones Industrial Average fell back 300 points, or 1.1%.

Stocks mostly fell on Tuesday and markets finally ran out of steam ending the recent price rally as investors looked to bank recent market gains ahead of tomorrow’s Fed announcement.

Therefore, the blistering run that pushed the S&P 500 into positive territory for the year on Monday came to a fault, perhaps as investors wake up to smell the coffee following yesterday’s official end to the US economies bullish cycle.

The National Bureau of Economic Research declared that the US has been in a recession since February, thus ending a 128-month expansion.

However, the news hasn’t fazed the NASDAQ traders, as another good day for technology stocks still pushed the Nasdaq Composite to its second-straight record high. The index gained 0.3% to end around 9,954, after briefly touching the 10,000 milestone earlier in the day. The S&P 500 lost 0.8% to end around 3,207 while the Dow Jones Industrial Average fell back 300 points, or 1.1%, to finish near 27,272, snapping a six-day winning streak. 

Coronavirus cases worldwide hit the highest daily total ever on Sunday

Meanwhile, despite the number of new coronavirus cases worldwide hitting the highest daily total ever on Sunday, and remained elevated on Monday and Tuesday, investors are instead cheering how global economic data is proving resilient in the first instances.

In anticipation of V-shaped recovery, investors have been chasing the did, on the fear of missing out and confident that the work governments and central banks will be there to support with continued stimulus packages. 

However, the experts ate not so sure that the coronavirus is just going to magically disappear, yet. 

Dr. Anthony Fauci who is a key member of the White House coronavirus task force, a top infectious disease expert, has been speaking with biotech executives at a conference held by the Biotechnology Innovation Organization, today.

Dr. Fauci  has described Covid-19 as his “worst nightmare” and has warned that “in a period of four months, it has devastated the whole world,’ and,  “it isn’t over yet.” “An efficiently transmitted disease can spread worldwide in six months or a year, but “this took about a month,’ he said. 

8% of firms now plan to hire more staff compared to just 1% last month

As for data, of which not much attention as being paid due to Friday’s US Nonfarm payrolls, the NFIB measure of small business optimism increased 3.5 pts to 94.4 in May, outperforming expectations.

“There was a lift in firms expecting more sales, and those planning to invest, while 8% of firms now plan to hire more staff compared to just 1% last month. However, earnings were worse than the previous month, ” analysts at ANZ Bank explained. 

As for the job openings, JOLTS fell to 5.05 million in April, the lowest level since December 2014. “Separations, which include layoffs and quits, eased to 9.89m vs 14.64m in March. The hospitality sector had more job openings, but also lost plenty of workers, as high unemployment benefits entice workers away,” the analysts at ANZ explained. 

Eyes turn to the Fed

No new or major policy announcements are expected, but the adoption of forward guidance tied to a minimum for inflation in the context of AIT could be a theme. 

Analysts at TD Securities explained that updated projections will probably show inflation falling further below 2%, and the funds rate near 0%, through at least end-2022.

Rates: We don’t see much of a reaction in the base case, but rates could fall a little given the recent bear steepening selloff. The rates market focus will be on forward guidance and specificity around QE.

FX: We expect greater consolidation ahead of the Fed meeting than after. However, the tone of risk assets will dominate as correlations remain firm. Biased to USDJPY downside; 107.10 is key support.
 

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